"Rublecoin", or Will the digital currency help defeat corruption

The Central Bank of the Russian Federation in April of this year announced that it was starting to test the Russian digital currency on real transactions with real customers. We understand why the state needs its own cryptocurrency and how the introduction of the “digital ruble” will affect the market.

The pilot project for operations with the digital ruble started in April this year. So far, they are limited to 13 banks that have confirmed their willingness to work in this format. The number of operations is also limited. If we draw analogies with the IT-sphere, then this is what is called a “closed alpha test”. Undoubtedly, there will be other stages of testing, so ordinary citizens have a year or two to get used to the novelty.

What is a digital ruble?

The digital ruble is not just non-cash funds on your bank card, it is a completely new format of the Russian monetary unit, which is different from what we are used to. Technically, a digital ruble is a unique digital code that is stored in an electronic wallet on a special platform of the Central Bank of Russia.

This is its main difference from non-cash money. The issue, that is, the release of the digital ruble, is carried out by the Central Bank of the Russian Federation. This money circulates within a special platform, fully controlled by the Central Bank. That is, the currency will not be stored in commercial banks, but in an electronic wallet under the control of the Central Bank of the Russian Federation. This eliminates the need for financial intermediaries between the seller and the buyer, allowing digital money to move directly from one electronic wallet to another, bypassing commercial banks.

The second important difference is related to by technology blockchain on which the digital ruble system is based. It allows you to track the movement of each ruble and restore the history of its movement, as well as limit in advance the scope of specific subsidies or transfers. This means that the Central Bank will be able to track when and where each ruble was spent.

The third difference between the digital ruble is the possibility of marking. This means that digital rubles can only be used for certain purposes, such as improving housing conditions or paying for medical treatment. Theoretically, this gives the Central Bank the ability to restrict the purchase of certain categories of goods for a specific group of people. For example, you can give out a child allowance that cannot be used to buy alcohol or cigarettes.

Why does the state need a digital ruble and will it defeat corruption?

For the state, the answer is simple - it is control. It will be able to track the movement of each ruble, at any time turn on, turn off or limit the use of currency for a citizen or company.

In addition to control, the state makes the country's financial system more manageable. With the development of fintech, a huge number of different cryptocurrencies and money surrogates have appeared in the world, which have already become a threat to overall stability. Completely transparent economy is the dream of any finance minister of any country, and the widespread use of the digital currency of the Central Bank brings this dream closer to reality.

For example, the state enters into a contract with a contractor to build a hospital. It is paid in digital rubles, and marked, according to the estimate. The contractor simply will not be able to take this money for himself, pay a kickback to a corrupt official, because, firstly, this is visible to the Central Bank, and secondly, why do you need digital rubles, for which you can no longer buy a yacht? Of course, you can come up with a cunning scheme for this case, but, you see, the degree of risk here is already incomparably higher than when “cutting” the old fashioned way. Some experts are already predicting a sharp decline in the cost of luxury real estate due to the introduction of the digital ruble. Sober-minded realtors are well aware of where the money comes from to buy giant mansions, and are already drawing the appropriate conclusions.

Another important plus for the state, especially for modern Russia, is that digital currencies do not require connection to SWIFT. This opens up new prospects for cross-border transfers without unnecessary intermediaries, sanctions and other unpleasant things.

Does a citizen need a digital ruble?

Why a digital ruble may be needed by an ordinary citizen is a difficult question. Existing non-cash rubles can be kept at a bank that offers balance interest, cashback, interest-free installments, and other benefits. If the conditions of one bank do not suit you, you can go to another. There will be no such competition with the digital ruble, and you can forget about interest on the balance.

The central bank claims that the digital ruble will make payments faster, easier and more secure. However, existing fast payment systems already provide instant transfers, and by phone number or card they are also simple. Perhaps the blockchain can provide more security, but the question of how often it is hacked remains open.

One of the advantages that the Central Bank talks about is the ability to pay with a digital ruble without using the Internet, via Bluetooth. The technology is probably useful for residents of remote villages, but, apparently, it does not work yet.
For parents, as well as for the state, a definite plus is in the possibilities of control. You can safely give children money to go to the cinema or the theater, to buy food in the school cafeteria and know for sure that they will not go to secret hobbies.

At the same time, judging by the experience of other states, digital currencies are not yet in great demand among the population. For example, in Nigeria (yes, yes, there is already a digital currency e-Naira there), less than a percentage of the population uses the state crypt, despite discounts when using it. It is understandable. With inflation of 20%, you will trust proven currencies.
In China, the situation is slightly better, but there, part of the digital currency was played among the population, and they don’t look into the blockchain for donated money, besides, the yuan is stable and the Chinese don’t care what they pay: regular or digital.

What is the conclusion from this? First of all, the state needs the digital ruble, and this is an excellent tool for controlling the spending of budget funds. And not only budget. For citizens, the new currency brings, on the one hand, stability, since the digital ruble will not burn out in the event of the bankruptcy of a commercial bank, on the other hand, it cannot be increased by playing investor. In a situation where inflation is at a relatively safe level, keeping part of the savings in digital currency is a smart decision, but in case of a crisis, humanity has not yet come up with anything better than gold.